Skip to main content

my stock picks for 2011

My approach to buying stocks is the same as buying most other things: Buy quality ones that are on sale. Otherwise known as value investing, this involves buying stocks that are currently priced below its fair value. I have 3 criteria when buying stocks:

1. priced at 10% discount to its fair value
2. company has been in business for a considerable amount of time
3. it sells an important product or service

As to coming up with its fair value, I use Graham's number which involves multiplying (earnings per share) x (book value per share) x (22.5), then getting the square root of the result. So far I have only examined stocks in the PSEi which lists 30 stocks. Among those listed, only 3 meet my criteria:

1. JGS - ideal price at P24.5
2. RLC - ideal price at P13.5
3. URC - ideal price at P37.5

It is interesting to note that these companies are Gokongwei led and as of today, they sell for P24.1, P13.08 and P37.0 respectively. As long as these stocks remain below my ideal price, I will buy them. Once they go up beyond the margin of safety, I may have to evaluate other stocks outside the PSEi and see if there are bargains to be found.

When do I sell? I will only sell my stocks when I turn 65 or if the company is being mismanaged or if it becomes severely overvalued by the market. Happy investing!

Comments

Popular posts from this blog

do not invest in Philippine pre-selling condos

I would rather shoot myself in the head than invest in pre-selling condos in the Philippines. My brother and I were interested on getting a condo unit not really as an investment but as a vacation home. However, when I read a contract to sell from one of the Philippines' top developers, I was shocked at how skewed it is on the developer's favor. There is very little protection, if any, on the buyer's side. I think you would have to be either really stupid or overly trusting to sign one of those contracts. The first issue I had was that they require the full post dated checks even before providing the contract to sell. What the hell? They should give the CTS when the buyer has paid 10% downpayment. Next, if they failed to deliver the unit as scheduled, there is no compensation to the buyer. They can practically construct the condo as slow as they can. Then they are also free to alter the floorplan as they please. So if you expect 10 units per floor, you might be surprised t…

a financial mistake most business owners make

What could offer the biggest potential returns of your investment? A profitable business. It can turn P1000 into millions but it can also turn into 000. Putting some money into a business is a must for any investor. Aside from the possibility of raking in profits, having a business actually helps you understand investments better. To quote Warren Buffett, "I am a better investor because I am a businessman and a better businessman because I am an investor". When it comes to learning about finance, running a business is the best teacher. We also need to apply investing principles in our business and what I would like to emphasize is the concept of diversification. A financial mistake most business owners make is the lack of diversification. This is especially true to small business owners. Let us illustrate with the typical lechon manok business. A young entrepreneur decides to start a lechon manok stall. He has great tasting chicken, has good location and people buy it. Needl…

from little things, big things grow

Most of us know this is true with investing but it takes discipline and a lot of patience to see this through. From little things, big things grow.  As investors, we need to realize that small amounts do matter and nothing should go to waste. We see pocket change, but the real value of those coins is many times over if it were invested and given time to grow.Yes, a few coins would not buy you much now but if invested well, it can grow to such that it can actually buy more in the future than what it can today. So if you see a coin, pick it up. It may only buy a piece of candy now but if invested well, it could pay for a decent meal 30 years later. Happy investing!